Dominic Mochrie, Paul Kotschorek
Oct 9, 2015
On Monday, October 5, the Liberal government in B.C. introduced Bill 38 (the Bill), enacting a Franchises Act (the Act), for first reading in its legislature. The possibility of franchise legislation in the province comes as no surprise given the government’s recent investigation into regulating franchising, and the recommendation of the British Columbia Law Institute’s (BCLI) Report on a Franchise Act for British Columbia (click here for more information). The private member’s bill proposing franchise legislation that was introduced last spring, which we reported on here, did not progress past first reading.
- As expected, the proposed legislation closely follows the format of the Uniform Law Conference of Canada’s Franchises Act and is substantially similar to the other legislation that is already in force in Alberta, Ontario, New Brunswick, Prince Edward Island and Manitoba.
- Among other things, the intentions of the Bill are to: (i) enact a duty of fair dealing among the parties to a franchise agreement and remedies for breach of that duty; (ii) confirm franchisees’ right of association and provide remedies for infringement; (iii) require disclosure by franchisors to prospective franchisees of financial and other information about the franchise prior to entering into a franchise agreement; (iv) provide conditions for rescission of a franchise agreement; (v) provide circumstances in which there may be liability for damages; and (vi) prevent the waiver of application of the Act in the event of a claim or dispute under a franchise agreement that is subject to the Act.
- The Bill also includes some noteworthy concepts that are not found in all (or in some cases, any) of the other regulated provinces:
- The Bill provides for the explicit ability to deliver disclosure documents by email.
- The Bill has a much-needed “substantial compliance” provision, which states that the existence of a defect in form, a technical irregularity or an error in a disclosure document (or statement of material change) will not affect its validity provided that such blemishes do not affect its substance and, further, that the disclosure document (or statement of material) is “substantially in compliance” with the Act. Currently, Ontario is the only regulated province that does not include such a provision.
- Some forms of confidentiality agreements and site selection agreements will not be considered “franchise agreements” and may be signed in advance of disclosure.
- Similarly, monetary deposits paid by a prospective franchisee that are refundable without obligation will not trigger a disclosure obligation.
- A franchisee need not elect between a rescission remedy and a statutory right of action for damages but that franchisee may not receive double recovery if successful in both instances.
- The Bill expressly provides that a release obtained with respect to the settlement of a specific action, claim or dispute will not be rendered void by the general provision that disallows waiver or release of the application of the Act.
If the Bill becomes law, British Columbia will be the sixth Canadian province to adopt franchise legislation. However, even if all progresses smoothly, it is unlikely that the Bill will become law until sometime in 2016, with the possibility of a further delay before the disclosure regulation (of which a draft has yet to be publicly circulated) comes into effect.
The complete draft of Bill 38 can be found here.
Check back for updates and changes as the Bill progresses through the Legislative Assembly in B.C.
If you have any questions, please contact a member of Osler’s Franchise Group.